Court Relieves Builders of Some Chinese Drywall Liability

A Florida court ruling relieves home builders of some liability in the ongoing dispute over the use of defective Chinese drywall, which thousands of homeowners say has driven down home values and caused health problems.

In the decision, entered Nov. 5th and made public Wednesday, Judge Glenn Kelley of the 15th Judicial Circuit in Palm Beach County, Fla., said that because home builders did not manufacture the problematic drywall and were not within the chain of distribution, they could not be held “strictly liable” for the alleged defects. Legal observers say that the decision could set a template for other judges to use to adjudicate drywall cases across the country. (Read the decision)

Mr. Kelley could not be reached for comment.

The underlying case, which was brought by Florida homeowner Marlene Bennett against Florida-based Centerline Homes Inc. and later consolidated to include similar complaints, aimed to pin more responsibility on the builders for installing the faulty materials, and sought multiple damages including economic losses for declines in home values and personal losses based on the alleged nuisance caused by fumes emitted from the drywall. Ms. The plaintiffs’ attorney could not be reached, and it is unclear if an appeal is planned.

During the housing boom, drywall, which is gypsum pressed between paper and used in walls and ceilings, was imported from China to fill a domestic shortage. A growing number of homeowners–there have been more than 3,600 reports in 39 states –complain that it generates sulfurous odors and corrosion that tarnishes metals and causes appliances such as air conditioners to fail. The government recommends consumers remove any possibly faulty drywall.

Although no study has yet linked the drywall to specific health problems, homeowners have complained of respiratory issues and headaches. An April report from the Consumer Product Safety Commission identified five brands of Chinese-made “problem drywall,” and said that some Chinese-made samples emitting hydrogen sulfide at a rate 100 times greater than non-Chinese drywall boards.”

The recent decision covering all of Palm Beach County’s cases could be adopted by other state and federal courts hearing the same issues, said Stacy Bercun Bohm, an attorney with Akerman Senterfitt, which represented several builders in the suit. She’s hopeful it will be copied in Louisiana’s high-profile multi-district litigation, which consolidated federal drywall cases brought by thousands of aggrieved homeowners.

The news undoubtedly pleases the building industry because it limits the economic damages that homeowners can recover from builders to the terms spelled out in the home-purchase contract. Damages such as loss of home value and lost profits in homes rented out would not be available pursuant the ruling, she said. “My clients are very, very excited about this,” Jim McNeil, head of Akerman’s national residential development practice. “This is a big step forward for them.”

Craig Perry, chief executive of Centerline, said he was pleased with the decision, and said that builders are “just as much a victim” of the suppliers of the drywall as the homeowners are.

“I know I’m the responsible party for building the home, and I selected who was going to be my contract vendee to put in the product, and I prescribed the product to be put in, it was just a faulty product,” he said in an interview Thursday.

For several years, builders have feared expensive lawsuits and court settlements over a product largely purchased and installed by subcontractors. Some, have even paid to fix the homes themselves. Lennar Corp., one of the biggest builders in Florida, set aside $80.7 million to cover drywall claims from nearly 900 homeowners. It hopes to be reimbursed by insurers and others.

While several court settlements and decisions have been reached, home builders’ role and responsibilities related to drywall remain unclear. Last month, Knauf Plasterboard Tianjin drywall, one of the biggest suppliers of the problematic wallboard, along with suppliers and commercial liability insurers, agreed to remove and replace the company’s drywall, as well as all electrical wiring, gas tubing and appliances from 300 homes in four states.